How to Avoid Restaurant Cash Flow Problems

February 9, 2017 0

Owning a restaurant can be a bit of a whirlwind. The unpredictability of the industry can cause many restaurants to experience cashflow problems at some point. Even the most conscientious, organised and prepared business owner can run into trouble.

Although you can’t prepare for every eventuality or control the economic climate, there are certain steps you can take to try to avoid major cashflow issues.

Keeping track of money coming in and money going out

Keep up-to-date accounts to track how much money is coming into the business and how much is going out. Be sure to account for all the company’s expenses – including rent, suppliers, marketing, wages and tax & VAT.

(A lot of companies do get into difficulties over when they should or shouldn’t be paying VAT. If you are in any doubt, ask your trusted Accountant straight away. We have seen a number of business owners who discovered that they should have been paying VAT when they had believed they didn’t need to for a particular reason. The resulting VAT bill and associated penalties led to considerable cashflow problems for them.)

Have a safety fund

If you can, put a bit of money aside for any unexpected bills – such as equipment breaking down, having to take on replacement staff at short notice or an unexpected tax bill.

With a safety fund, you can lessen the disruption caused to the business by unexpected events. That said, there is not always any spare money to be able to have a safety fund.

Don’t hoard inventory

Whilst you don’t want to be short of supplies, consistently overbuying can result in cash flow problems for your business, as well as wastage. It is a careful balancing act, but it is worth trying to get it right.

Build good supplier relationships

A good relationship with your suppliers can be very beneficial for both you and them.

Ensure your suppliers are supplying you with what you want, when you want it. In return, you should pay them on time. A good relationship will be especially useful if you ever need any favours from them – such as extra deliveries or some breathing space to pay their bill.

Specialist advice for restaurant owners

Taking these steps can reduce your chance of running into trouble. However, nothing is certain and even the biggest named restaurants have seen some closures due to the current economic climate.